US Phone Providers Take on TV Challenge

09 November 2004

America's heavyweight phone companies are looking to flex their muscles in the cable TV arena.

The nation's largest phone carrier Verizon has committed $800 million (€618m, £431m) this year to roll out high-capacity fiber lines delivering internet, voice and video services through a single connection to its millions of customers. Billions more dollars will be spent over the next five years.

SBC Communications, which traces its roots back to the orginal Bell Telephone Company, is investing between $4bn and $6bn to deliver TV via fiber optics technology and aims to reach 18 million of its current phone customer households by the end of 2007.

Both companies expect to offer customers some kind of TV service, albeit initially limited by area, within the first half of next year. And to steal a march on established cable TV rivals, the telcos aim to deliver fancier basic program packages at lower prices.

They will also resell satellite video programming; offer movie downloads from the internet; create large video-on-demand movie libraries; and launch niche programming geared at sports fans and Spanish speaking viewers.

Says Todd Rosenbluth of financial analyst Standard & Poor's: "We do have concerns about how telephone companies will successfully work with broadcasters. Their skill is to connect callers around the country. However, the telephone companies need to stop cable competition somehow."

So far, it is claimed, customers have reacted favourably to the idea of phone company as TV provider.

Verizon and SBC this year each began re-selling satellite TV service. SBC has signed up more than 200,000 customers since April, without aggressive marketing; while Verizon has gained a 13% share of the high-speed internet market in the Teaxs community of Keller, one of its first fiber roll-outs.

Data sourced from Wall Street Journal Online; additional content by WARC staff